Dissecting the Equity Premium

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dc.contributor.authorBeason, Tyleren
dc.contributor.authorSchreindorfer, Daviden
dc.date.accessioned2023-01-20T15:39:08Zen
dc.date.available2023-01-20T15:39:08Zen
dc.date.issued2022-08-01en
dc.date.updated2023-01-19T21:11:58Zen
dc.description.abstractWe use option prices and realized returns to decompose risk premia into different parts of the return state space. In the data, 8/10 of the average equity premium is attributable to monthly returns below -10%, but returns below -30% matter very little. In contrast, prominent asset pricing models based on habits, long-run risks, rare disasters, undiversifiable idiosyncratic risk, and constrained intermediaries attribute the premium predominantly to returns above -10% or to the extreme left tail. We show that the discrepancy arises from an unrealistically small price of risk for stock market tail events in the models.en
dc.description.versionAccepted versionen
dc.format.extent20 page(s)en
dc.format.mimetypeapplication/pdfen
dc.identifier.doihttps://doi.org/10.1086/720396en
dc.identifier.eissn1537-534Xen
dc.identifier.issn0022-3808en
dc.identifier.issue8en
dc.identifier.urihttp://hdl.handle.net/10919/113305en
dc.identifier.volume130en
dc.language.isoenen
dc.publisherUniversity of Chicago Pressen
dc.relation.urihttp://gateway.webofknowledge.com/gateway/Gateway.cgi?GWVersion=2&SrcApp=PARTNER_APP&SrcAuth=LinksAMR&KeyUT=WOS:000807296800001&DestLinkType=FullRecord&DestApp=ALL_WOS&UsrCustomerID=930d57c9ac61a043676db62af60056c1en
dc.rightsIn Copyrighten
dc.rights.urihttp://rightsstatements.org/vocab/InC/1.0/en
dc.subjectRARE DISASTERSen
dc.subjectRISK-AVERSIONen
dc.subjectASSETen
dc.subjectDYNAMICSen
dc.subjectPRICESen
dc.titleDissecting the Equity Premiumen
dc.title.serialJournal of Political Economyen
dc.typeArticle - Refereeden
dc.type.dcmitypeTexten
dc.type.otherArticleen
dcterms.dateAccepted2021-12-01en
pubs.organisational-group/Virginia Techen
pubs.organisational-group/Virginia Tech/Pamplin College of Businessen
pubs.organisational-group/Virginia Tech/Pamplin College of Business/Finance, Insurance, and Business Lawen
pubs.organisational-group/Virginia Tech/All T&R Facultyen
pubs.organisational-group/Virginia Tech/Pamplin College of Business/PCOB T&R Facultyen

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